The Indian economy has finally exited recession after two consecutive quarters of contraction as the GDP (Gross Domestic Product) grew by 0.4% in Quarter 3. ending December 2020 as opposed to the contraction of 7.3% that was reported in the September quarter.  

The Indian economy was on a downward spiral and had contracted by 24.4% in the April-June quarter and contracted to 7.3% in the July-September quarter. The economy was resurrected thanks to the growth recorded in the construction sector. For the December ending quarter, the construction sector recorded a growth of 6.2% as opposed to the contraction of 7.2% it saw in the previous quarter. The real estate and financial sector also helped the economy see growth as these sectors grew independently. These sectors grew 6.6% in the December ending quarter against the 9.5% contraction it saw in the preceding quarter. 

The manufacturing sector also saw a sharp growth as it grew 1.6% against the contraction of 1.5% it saw in the prior quarter. Electricity, fishing and quarrying also reported growth at 7.9% and 3.9% respectively.  

Meanwhile, hotels, transport, communication and services were the worst-hit sectors. Although these sectors saw a marginal recovery in the last quarter, they continued their trend of registering negative growth.  

However, the news of India exiting the recession also came with a warning of an estimation of another contraction. According to the National Statistical Office (NSO), the GDP is estimated to contract 8% than the earlier forecasted 7.7%.  The main reason for such a steep contraction is cited as loss of economic recovery momentum and subsidy payouts of the current quarter.  

A principal economist at ICRA LTD spoke to a news agency where they said that lead indicators have been seeing a loss of momentum so far in the fourth quarter of the Financial Year 2021 in contrast to the expected sentiment improvement brought by the COVID-19 vaccine rollout.  

The economist also added, “We expect consumption growth to strengthen only modestly in the near term, as a part of the healthier income generation is used to rebuild the savings buffers that were drained during the lockdown by those in the informal sector, contact intensive industries and the self-employed.” 

According to the economist, the NSO is forecasting that the GDP may slip back into a correctional contraction in the fourth quarter.  

Meanwhile, according to the Reserve Bank of India’s Monetary Policy Review, India is projected to score a GDP growth of 10.5% for the Financial year 2021-22. The International Monetary Fund (IMF) also expects India to grow at 11.5% for the same financial year. According to And India Ratings and Research (Ind-Ra), the GDP will bounce back to 10.4 % year on year in the next financial year.  

India is the third biggest economy in the Asian subcontinent and the fifth-biggest economy in the world. The Indian economy was struggling before the COVID-19 pandemic and after the pandemic, it slumped further. According to the data, the growth rates had fallen down from 9% in 2016 to 0.5 at the end of 2019.